Can my auto insurance cancel my policy after an accident?

In some cases, an insurance company may be able to cancel your coverage after you were in an accident in Aurora.

But there are only four legal reasons an auto insurance company can cancel your policy:

  • Non-payment of insurance premiums. There’re no required grace periods for insurance payments in Colorado, so if the policyholder is late by one day, the insurer can cancel the coverage or fine the policyholder. But many insurers offer a grace period.
  • Your driver’s license is suspended or revoked. If you were in an accident and your driver’s license was suspended or revoked, then the insurance company may cancel your policy mid-term.
  • You knowingly made a false statement on an insurance claim.
  • You knowingly made a false statement on you initial application for coverage.

If one of these four reasons applies to you, the insurance company has legitimate cause to cancel or rescind your insurance policy. Insurance companies are required to refund the premiums to the policyholder at a prorated value if they cancel the policy.

In many cases when a driver disputes a cancellation, the insurer invokes the fourth reason to deny coverage: the insured lied on the initial application. When auto insurance companies consider someone for coverage, they have the applicant fill out paperwork asking them questions about the different factors that determine coverage rates and decisions.

The factors that determine coverage rate include:

  • the applicant’s driving record;
  • where the car is driven;
  • applicant’s gender and age;
  • applicant’s marital status;
  • whether the applicant paid prior insurance coverage;
  • prior claim history;
  • vehicle use; and
  • the make and model of the vehicle.

Misstatements could give the insurer grounds for auto insurance to cancel your policy.

What duties does my insurance company owe me?

If you were in an accident but none of the four criteria mentioned above apply, then the insurer should not cancel your policy. As long as you are a customer, insurance companies have a duty to act in good faith when handling claims.

The car insurance company’s duty can include:

  • promptly investigating claims;
  • paying undisputed claims promptly;
  • communicating with the claimant about the status of the claim; and
  • providing a prompt and reasonable explanation of a claim decision.

These duties apply to the different types of car insurance. For example, if you have medical payments (medpay) insurance, and you file a claim then your insurer needs to give you a prompt decision about the claim and follow the other duties. When another driver files a claim with your liability insurance, the duty may include obligating the insurer to hire an attorney to defend your rights in court.

What can I do if I encounter trouble with my claim?

If you’re auto insurance company will not honor its commitments for your claim, you can file a bad faith insurance claim. The Law Office of D.J. Banovitz can investigate the circumstances surrounding your insurance coverage, determine if you have a bad faith insurance claim, and help you recover compensation for your original claim. Contact our office at 303-300-5060 to schedule a free consultation.